SHANGHAI - A secret of China's success in
becoming a global manufacturing hub in such a
short period of 20-plus years lies in a unique
resource - it mammoth population, which ensures an
endless supply of cheap labor. But China may not
maintain this edge for long. Its huge population
could become a liability if problems are not
properly addressed.
In a matter of one
generation from now, China will experience the
largest demographic transformation in human
history. Three
population waves - aging,
shrinking of the labor pool, and declining
population - will sweep across the country.
By 2015, China's baby-boom generation will
start reaching retirement age. China is already an
"aging society" by United Nations definition. The
UN maintains that a society is defined as aging
when adults aged 65 or older exceed 7% of the
total population. China crossed this line some
time between 2000 and 2005.
It is
estimated that by 2010, the country's population
of those over 60 years old will reach 174 million,
accounting for 12.78% of the total. Furthermore,
China's work-age population, 15-64, will reach its
peak in 2020 to a total of 940 million. It will
then decline and be overtaken by India.
Around 2035, the whole Chinese population
will peak at 1.46 billion, and then begin to
decline, again to be replaced by India as the
world's most populous nation.
Possible
population policy changes China's
cabinet-level National Population and Family
Planning Commission (NPFPC) recently expressed
deep worries about the looming demographic
transformation at the 14th World Productivity
Congress held in Shenyang.
Zhang Weiqing,
minister in charge of the NPFPC, called the
population problem a "time bomb" facing the
country that could explode any time. Zhao Baige,
deputy minister in charge of the NPFPC, said a new
population policy is being considered, hinting
that China might relax its three-decades-old
one-child policy.
A major principle of the
new policy would shift the emphasis from quantity
control to focus on quality improvement, Zhao
said. Also, the implementation of the population
policy will be changed from the currently
administrative enforcement to "comprehensive
management", aiming to deal with issues arising
from the increasingly mobile population.
In plain words, China will likely allow
its people true freedom to migrate around the
country, which means it will eventually abandon
the 50-year-old rigid residency-registration
system that virtually bans anyone from resettling
in another place in the country without government
permission.
This outmoded system is
rapidly becoming ridiculous. Some 120 million to
140 million rural migrant laborers are still
regarded as "farmers" in their residency
registration even though most of them have been
working and living in cities for the past two
decades.
"We are contemplating how to turn
China, with 20% of the world population, into a
human-capital powerhouse," said Zhao. His words
suggest a subtle change in the mindset of China's
policymakers. The one-child policy, introduced in
the late 1970s, implies that a big population is a
liability for China. But now Beijing wants to view
it more as a big asset.
Prompt action
needed Nowadays, quite a number of
economists, inside China and outside, are keen on
making headlines by predicting when China's
economy will overtake the United States, but they
may simply ignore the demographic dynamics between
the two countries.
From 2000 through to
2050, China, India and the US will be the three
most populous countries in the world, which will
largely define the geo-economy in the 21st
century. Of the three countries, China's major
challenge lies in its preparedness for an aging
society and its ability to build an army of
skilled workers.
China is getting older
faster than it's getting richer compared with the
US. According to a UN projection, by 2040, the
proportion of elderly people in Chinese population
will rise to 28%, which is higher than what it
predicts for the United States. Also, in the long
run, India's population structure will become
better than China's in that in 15 years India will
have a labor force that is both bigger and younger
than China's.
China's internal dynamics
will change too. If it fails to put in place an
adequate system of old-age support by then, it
will be unable to manage the demographic
transition without widespread economic hardship -
which will jeopardize President Hu Jintao's
strategy of building up a "harmonious society".
"China needs to act soon and decisively,"
said Richard Jackson, the director of Washington,
DC-based Global Aging Initiative at the Center for
Strategic and International Studies.
China, along with India, has been the
biggest exporter of talent for decades. Now China
is sucking back the students studying and working
overseas, mainly in the US and Europe. But
repatriating overseas talent is not enough. China
needs to enhance fundamentally the quality of its
domestic labor force, half of whom are migrant
workers from the countryside.
China's
economic miracle can largely be attributed to the
"demographic premium", meaning that a huge pool of
low-cost labor has fueled an unprecedented
manufacturing boom, while rising numbers of young,
middle-class urban couples have spent generously
on housing, automobiles, consumer goods and other
products and services.
But the "premium"
can't last long. In 15 years, China will move from
having an "unlimited labor supply" to facing a
shrinking labor army. Thus China has to start
right away to build up a legion of skilled
workers. In an aging society, sustaining high
economic growth and maintaining high living
standards hinge largely on high productivity,
which is the derivative of quality human capital.
By now, nearly half of Chinese citizens
were born under the one-child policy. But a
discrepancy of this policy is that it gives
certain leeway to farmers for them to give birth
to more than one child. But in the countryside
both the health-care and education systems are far
poorer than in cities. The overwhelming majority
of children born and raised in poor health and
education systems in rural areas are creating a
seriously flawed population structure.
While the government is giving priority to
rebuilding and strengthening the health-care and
education systems in rural areas by pouring in
tens of billions of yuan, it remains a huge
challenge to tackle the problem given the fact
that the country's rural population amounts to
about 80% of the more than 1.3 billion people in
China.
Scott Zhou is a
Shanghai-based analyst on China's political,
economic and foreign relations issues.
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